How long will my retirement savings last?
A $1,000,000 portfolio using a 4% withdrawal rate ($40,000/year) has historically lasted 30+ years in 95% of historical scenarios. Withdrawing 5% drops that success rate to roughly 80% over 30 years. Sequence of returns in the first decade is the single biggest factor determining whether your savings last.
Formula
Portfolio Longevity: Annual Withdrawal ÷ Portfolio Value = Withdrawal Rate. If withdrawal rate ≤ 4%, historically 30-year success rate ≥ 95%. Each 0.5% increase in withdrawal rate meaningfully reduces long-term survival probability.
Example
James retires at 62 with $800,000. He withdraws $36,000/year (4.5% rate). Over a 30-year retirement, historical success rate is roughly 85–87% — acceptable but not bulletproof. If he delays Social Security to 67 and reduces portfolio withdrawals to $24,000/year (3% rate) in the interim, his portfolio survival probability rises above 97% for a 35-year horizon.
How it works in detail
How long retirement savings last depends on three variables: portfolio size, annual withdrawal amount, and investment returns — especially their sequence. The foundational research comes from William Bengen (1994), who found that a 4% initial withdrawal rate, adjusted for inflation annually, survived every 30-year historical period using a 50–75% equity allocation. The Trinity Study (1998) confirmed this with a 95%+ success rate over 30-year periods. For early retirees facing 40–50 year retirements, the calculus shifts. Pfau and Kitces have shown that a 3.3–3.5% withdrawal rate provides higher confidence over longer horizons. A sequence-of-returns shock — poor markets in the first 5–10 years of retirement — can permanently impair a portfolio even if average long-term returns are fine, because withdrawals lock in losses before recovery. Practical strategies to extend portfolio longevity include: flexible spending (cutting withdrawals 10% in down years), a cash buffer of 1–2 years of expenses, a bond tent around retirement date, and delaying Social Security to reduce portfolio dependency. Monte Carlo simulation, which runs thousands of randomized return scenarios, gives a more realistic probability range than historical backtests alone.
Use finai.app's retirement calculator to model exactly how long your savings will last under different withdrawal scenarios.
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What is a safe withdrawal rate for early retirement (40+ years)?
For retirements lasting 40+ years, research suggests 3.25–3.5% is safer than the traditional 4%. A $2M portfolio at 3.5% provides $70,000/year. With dynamic spending (cutting 10–15% in down markets), you can safely withdraw 4–4.5% even over 50 years.
What is Monte Carlo simulation for retirement planning?
Monte Carlo simulation tests your retirement plan against 1,000+ randomized market return sequences to estimate your probability of success (never running out of money). Unlike average-return projections, it captures sequence-of-returns risk — the danger that a market crash in your first few retirement years permanently impairs your portfolio.
What is sequence of returns risk?
Sequence of returns risk is the danger that poor market returns in the first few years of retirement permanently damage your portfolio, even if long-term average returns are normal. A -20% crash in year 1 of retirement is far more destructive than the same crash in year 10, because you're withdrawing from a shrinking base.
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